U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2014
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission File Number: 000-05378
George Risk Industries, Inc.
____________________________
(Exact Name of registrant as specified in its charter)
Colorado 84-0524756
________ __________
(State of incorporation) (IRS Employer Identification No.)
802 South Elm
Kimball, NE 69145
___________ _____
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number (308) 235-4645
______________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
None None
____ ____
Securities registered under Section 12(g) of the Act:
Class A Common Stock, $.10 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Sections 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
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Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229-405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229-405 of this chapter) is not contained herein, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer,
a non-accelerated filer, or a small reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "smaller reporting company
in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check is smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).
Yes [ ] No [ X ]
The aggregate market value, as of August 13, 2014, of the common stock (based on
the average of the bid and asked prices of the shares on the OCTBB of George
Risk Industries, Inc.) held by non-affiliates (assuming, for this purpose, that
all directors, officers and owners of 5% or more of the registrant's common
stock are deemed affiliates) was approximately $14,176,421.
The number of outstanding shares of the common stock as of August 13, 2014 was
5,029,775.
DOCUMENTS INCORPORATED BY REFERENCE
A material vendor contract with a customer that accounts for a material portion
of our sales.
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Part I
Preliminary Note Regarding Forward-Looking Statements and Currency Disclosure
This annual report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may", "should", "expects",
"plans", "anticipates", "believes", "estimates", "predicts", "potential" or
"continue" or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors", that may cause our or our industry's actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We do not intend to update
any of the forward-looking statements to conform these statements to actual
results except as required by applicable law,including the securities laws
of the United States.
Our financial statements are stated in United States dollars, rounded to the
nearest thousand, and are prepared in accordance with United States Generally
Accepted Accounting Principles.
Item 1 Business
(a) Business Development
George Risk Industries, Inc. (GRI or the company) was incorporated in 1967
in Colorado. The company is presently engaged in the design, manufacture,
and sale of computer keyboards, push button switches, burglar alarm
components and systems, pool alarms, thermostats, EZ Duct wire covers and
water sensors.
Products, Market, and Distribution
The company designs, manufactures, and sells computer keyboards, push-button
switches, burglar alarm components and systems, pool alarms, and water sensors.
Our security burglar alarm products comprise approximately 85 percent of net
revenues and are sold through distributors and alarm dealers/installers.
The security segment has approximately 1,000 customers. One of the distributors,
ADI (which is a division of Honeywell International)accounts for approximately
39 percent of the company's sales of these products. Tri-Ed Distribution
accounts for another 12 percent of company sales. Loss of these distributors
would be significant to the company. However, both companies have purchased
from the company for many years and are expected to continue. Also, the company
has obtained a written agreement with ADI. This agreement was signed in
February 2011 and initiated by the customer. The contents of the agreement
include product terms, purchasing, payment terms, term and termination, product
marketing, representations and warranties, product support, mutual
confidentiality, indemnification and insurance, and general provisions.
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The keyboard segment has approximately 800 customers. Keyboard products are sold
to original equipment manufacturers to their specifications and to distributors
of off-the-shelf keyboards of proprietary design.
Competition
The company has intense competition in the keyboard and burglar alarm lines.
The burglar alarm segment has approximately eight major competitors. The company
competes well based on price, product design, quality, customization, and prompt
delivery.
The competitors in the keyboard segment are larger companies with automated
production facilities. GRI has emphasized small custom order sales that many
of its competitors decline or discourage.
Research and Development
The company performs research and development for its customers when needed
and requested. Costs in connection with such product development have been
borne by the customers. Costs associated with the development of new products
are expensed as incurred.
Employees
GRI has approximately 165 employees.
Item 2 Properties
The company owns the manufacturing and some of the office facilities. Total
square footage of the plant in Kimball, Nebraska is approximately 42,500 sq. ft.
Additionally, the company leases 15,000 square feet for $1,535 per month with
Bonnie Risk. Bonnie Risk is a director of the company.
As of October 1, 1996, the company also began operating a satellite plant in
Gering, NE. This expansion was done in coordination with Twin Cities
Development. The company leased manufacturing facilities until July 2005.
During the first quarter of fiscal year end 2006, the company purchased a
building that is 7,200-sq. ft. in size. Currently, there are 30 employees at
the Gering site.
Item 3 Legal Proceedings
None.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
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Part II
Item 5 Market for the Registrant's Common Equity and Related
Stockholders' Matter
Principal Market
The company's Class A Common Stock, which is traded under the ticker symbol
RSKIA, is currently quoted on the OTC Bulletin Board by one market maker.
Stock Prices and Dividends Information
2014 Fiscal Year
High Low
May 1-July 31 7.90 6.92
August 1-October 31 9.00 7.70
November 1-January 31 9.04 7.87
February 1-April 30 9.00 7.32
2013 Fiscal Year
High Low
May 1-July 31 6.20 5.02
August 1-October 31 7.24 5.76
November 1-January 31 7.59 6.55
February 1-April 30 7.40 6.60
On September 30, 2013, a dividend of $.30 per common share was declared
for the fiscal year ended April 30, 2014.
For the prior fiscal year, a dividend of $0.28 per common share was declared
on September 30, 2012 and an additional dividend of $0.22 per common share
was declared on December 16, 2012 for a total dividend payout of $0.50 per
common share.
The number of holders of record of the company's Class A Common Stock
as of April 30, 2014, was approximately 1,200.
Repurchases of Equity Securities
On September 18, 2008, the Board of Directors approved an authorization for
the repurchase of up to 500,000 shares of the company's common stock.
Purchases can be made in the open market or in privately negotiated
transactions. The Board did not specify an expiration date for the
authorization.
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The following tables show repurchases of GRI's common stock made on a
quarterly basis:
2014 Fiscal Year Number of shares repurchased
May 1-July 31 1,850
August 1-October 31 1,700
November 1-January 31 750
February 1-April 30 1,050
2013 Fiscal Year Number of shares repurchased
May 1-July 31 0
August 1-October 31 5,574
November 1-January 31 1,500
February 1-April 30 0
There are still approximately 350,000 shares available to be repurchased under
the current resolution.
Item 6 Selected Financial Data
As a smaller reporting company, we are not required to respond to this item.
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Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Executive Overview
__________________
George Risk Industries, Inc. (GRI) is a diversified manufacturer of electronic
components, encompassing the security industry's widest variety of door and
window contact switches, environmental products, proximity switches and custom
keyboards. The security products division comprises the largest portion of GRI
sales and are sold worldwide through distributors, who in turn sell these
products to security installing companies. These products are used for
residential, commercial, industrial and government installations. International
sales accounted for approximately 13.7% of revenues for fiscal year 2014 and
6.3% for 2013.
GRI is known for its quality American made products, top-notch customer service
and the willingness to work with customers on their special applications.
GRI owns and operates its main manufacturing plant and offices in Kimball,
Nebraska with a satellite plant 40 miles away in Gering, Nebraska.
The company has substantial marketable securities holdings and these holdings
have a material impact on the financial results. For the fiscal year ending
April 30, 2014, other income accounted for 23.10% of income before income taxes.
In comparison, other income accounted for 31.66% of the income before income
taxes for the year ending April 30, 2013. Management's philosophy behind having
holdings in marketable securities is to keep the money working and gaining
interest on the cash that is not needed to be put back into the business. And
over the years, the investments have kept the earnings per share up when the
results from operations have not fared as well.
Management is always open to the possibility of acquiring a business that would
complement our existing operations. This would probably not require any outside
financing. The intent would be to utilize the equipment, marketing techniques
and established customers to increase sales and profits.
There are no known seasonal trends with any of GRI's products, since we mostly
sell to distributors and OEM manufacturers. The products are tied to the housing
industry and will fluctuate with building trends.
Liquidity and Capital Resources
_______________________________
Operating
Net cash increased $1,013,000 during the year ended April 30, 2014 compared to
a decrease of $914,000 during the year ended April 30, 2013. Accounts receivable
increased $119,000 during the current year and showed a $244,000 increase in the
prior year. The increase in cash flow from accounts receivable is a reflection
of increased sales and stronger attention to collections. At April 30, 2014,
75.47% of the receivables were less than 45 days and less than 1% were over 90
days. In comparison, 69.77% of the receivables were considered current (less
than 45 days) and 0.43% of the total were over 90 days past due for the prior
year during the same period.
Inventories increased by $159,000 in fiscal year ended April 30, 2014 while the
prior period showed a decrease of $277,000 at year end.
Prepaid expenses increased by a net of $72,000 in the current year and decreased
by $80,000 for the year ended April 30, 2013, primarily due to prepaid orders
for parts not yet received at year end.
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For the year ended April 30, 2014, accounts payable increased by $41,000 as
compared to a decrease of $28,000 for the same period the year before. The
change in cash in regards to accounts payable is largely based on timing.
Payables are paid within terms and fluctuate based primarily on inventory needs
for production. Accrued expenses increased $19,000 for the year ended April
30, 2014, primarily due to timing of personnel related items. Income taxes
payable increased for the year ended April 30, 2014, up $379,000 from the
prior year due in part to the gain on the sale of the company airplane, sale of
investments, and the elimination of the loss carry forward from prior years.
Investing
As for our investment activities, $81,000 was spent on purchases of property
and equipment during the current fiscal year, compared to $104,000 during the
year ended April 30, 2013. Additionally, the Company continues to purchase
marketable securities, which include municipal bonds and quality stocks. Cash
spent on purchases of marketable securities for the year ended April 30, 2014
was $620,000 and $760,000 was spent for the corresponding period last year.
Conversely, net proceeds from the sale of marketable securities for the year
ended April 30, 2014 were $5,000 and $89,000 for the same period last year.
We use "money manager" accounts for most stock transactions. By doing this, the
Company gives an independent third party firm, who are experts in this field,
permission to buy and sell stocks at will. The Company pays a quarterly service
fee based on the value of the investments. Furthermore, the Company continues to
purchase back its common stock when the opportunity arises. For the year ended
April 30, 2014, the Company purchased $38,000 of treasury stock and
$36,000 was bought back for the year ended April 30, 2013. We have been
actively searching for stockholders that have been "lost" over the years. The
payment of dividends over the last nine fiscal years has also prompted many
stockholders and/or their relatives and descendants to sell back their stock to
the Company.
As for investment activities, a net amount of $4,000 was spent on other assets
manufactured for the year ended April 30, 2014, while $1,000 was capitalized on
these activities during the prior year. Additionally, the company airplane was
sold during the year ended April 30, 2014 with proceeds from that sale amounting
to $127,000.
Financing
Cash used in financing activities were $1,374,000 for the year ended April 30,
2014, which mostly consisted of dividends paid. The company declared a dividend
of $0.30 per share of common stock on September 30, 2013 for the current year,
while a $0.28 per share of common stock dividend September 30, 2012 and a
dividend of $0.22 per share of common stock on December 16, 2012 were issued in
the prior year.
Results of Operations
_____________________
GRI completed the fiscal year ending April 30, 2014, with a net profit of 28.31%
of net sales. Net sales were at $11,025,000, up 4.9% over the previous year.
The slight increase in sales is a result of continued quality service and a
price increase implemented in January, 2014. Cost of goods sold was 44.46% of
net sales for the year ended April 30, 2014 and 48.42% for the same period last
year. Management continues to keep labor and other manufacturing expenses in
check, therefore keeping the cost of goods sold percentage in the desired range
of 45 to 50%.
Operating expenses were 23.66% of net sales for the year ended April 30, 2014 as
compared to 25.91% for the corresponding period last year. Management's goal is
to keep the operating expenses around 30% or less of net sales, so the goal has
been met for the current fiscal year. Income from operations for the year ended
April 30, 2014 was at $3,514,000, which is a 30.24% increase from the
corresponding period last year, which had income from operations of $2,698,000.
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Other income and expense results for the fiscal year ended April 30, 2014
produced a gain of $1,055,000. This is in comparison to a gain of $1,250,000
for the fiscal year ended April 30, 2013. Dividend and interest income was
$668,000, which was down 15.34% for the year. Dividend and interest expense at
April 30, 2013 was $789,000. Gains on investments for the current fiscal year
were $384,000, which is a 16.52% decrease over the prior year. Gains on
investments for the fiscal year ending April 30, 2013 were $460,000.
Net income for the year ended April 30, 2014 was $3,122,000, which is up
dramatically from the prior year, which produced a net gain of $2,721,000.
Earnings per common share for the year ended April 30, 2014 was $0.62 per share.
EPS for the year ended April 30, 2013 was $0.54 per share.
Management expects sales to stay steady for the fiscal year ending April 30,
2015. The company's main division of products that are sold (security switches)
are directly tied to the housing industry. And since the housing industry's
performance has improved, the company's sales have also improved in relation to
the economy. We are always researching and developing new products that will
help our sales increase. While we were not successful in launching the
anticipated new products in fiscal year 2014, we continue to work toward a new
release date for those products, and to search for products that complement
our current offerings.
At April 30, 2014, working capital increased 7.03% in comparison to the
previous fiscal year. The company measures liquidity using the quick ratio,
which is the ratio of cash, securities and accounts receivables to current
obligations. The company's quick ratio decreased to 14.565 for the year ended
April 30, 2014 compared to 18.390 for the year ended April 30, 2013, reflecting
a strong position in ability to meet capital needs as they arise.
New product development
The GRI Engineering department continues to develop enhancements to our
existing products as well as to develop new products that will continue to
secure our position in the industry.
Wireless technology is a main area of focus for product development. We are
looking into adding wireless technology to some of our current products.
First of all, we are working on a wireless version of our Pool Alarm that will
be easy to install in current construction. We are also concentrating on making
products compatible with the increasing popular Z-Wave standard for wireless
home automation.
We are working on high security switches. We have a triple biased high security
switch design nearly complete and an adjustable magnet design was completed for
recessed mounting applications.
Our molding department is working on new molds for enhancements to our new
Current Controller and a 29-series switch. The new versions of the Current
Controller will allow the user to control more lights with a single controller
or to handle higher voltage applications for use overseas.
We continue to research the possibilities of fuel level sensing and how that may
also serve other agricultural based needs. Several companies from around the
world have been looking for ways to secure fuel tanks and trucks. Our emphasis
would be in ways to safely monitor fuel levels and report tampering.
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Critical Accounting Policies
____________________________
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in conformity with generally accepted accounting principles in the United
States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses reported in those financial statements.
These judgments can be subjective and complex, and consequently actual results
could differ from those estimates. Our most critical accounting policies relate
to accounts receivable; marketable securities; inventory; income taxes; and
segment reporting.
Accounts Receivable-Accounts receivable are customer obligations due under
normal trade terms. The company sells its products to security alarm
distributors, alarm installers, and original equipment manufacturers. Management
performs continuing credit evaluations of its customers' financial condition and
the company generally does not require collateral.
The company records an allowance for doubtful accounts based on an analysis of
specifically identified customer balances. The company has a limited number of
customers with individually large amounts due at any given date. Any unantici-
pated change in any one of these customers' credit worthiness or other matters
affecting the collectibility of amounts due from such customers could have a
material effect on the results of operations in the period in which such changes
or events occur. After all attempts to collect a receivable have failed, the
receivable is written off.
Marketable securities-The Company has investments in publicly traded equity
securities, state and municipal debt securities, and hedge funds. The invest-
ments in securities are classified as available-for-sale securities, and are
reported at fair value. The investments in hedge funds are reported at cost.
The Company uses the average cost method to determine the cost of securities
sold and the amount reclassified out of accumulated other comprehensive income
into earnings. Unrealized gains and losses are excluded from earnings and
reported separately as a component of stockholder's equity. Dividend and
interest income are reported as earned.
In accordance with the Generally Accepted Accounting Principles in the United
States (US GAAP), the Company evaluates all marketable securities for other-
than temporary declines in fair value. When the cost basis exceeds the fair
market value for approximately one year, management evaluates the nature of
the investment, cause of impairment and number of investments that are in an
unrealized position. When it is determined that a security will probably remain
impaired, a recognized loss is booked and the investment is written down to its
new fair value. The investments are periodically evaluated to determine if
impairment changes are required.
Inventories-Inventories are valued at the lower of cost or market value. Costs
are determined using the average cost-pricing method. The company uses standard
costs to price its manufactured inventories, approximating average costs. The
reported net value of inventory includes finished saleable products, work-in-
process and raw materials that will be sold or used in future periods. Inventory
costs include raw materials, direct labor and overhead. The Company's overhead
expenses are applied, based in part, upon estimates of the proportion of those
expenses that are related to procuring and storing raw materials as compared to
the manufacture and assembly of finished products. These proportions, the method
of their application, and the resulting overhead included in ending inventory,
are based in part on subjective estimates and approximations and actual results
could differ from those estimates.
In addition, the Company records an inventory obsolescence reserve, which
represents the cost of the inventory that has had no movement in over two years.
There is inherent professional judgment and subjectivity made by management in
determining the estimated obsolescence percentage. In addition, and as
necessary, the Company may establish specific reserves for future known or
anticipated events.
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Income Taxes-US GAAP requires use of the liability method, whereby current and
deferred tax assets and liabilities are determined based on tax rates and laws
enacted as of the balance sheet date. Deferred tax expense represents the
change in the deferred tax asset/liability balances.
Segment Reporting and Related Information-The Company designates the internal
organization that is used by management for allocating resources and assessing
performance as the source of the Company's reportable segments. US GAAP also
requires disclosures about products and services, geographic area and major
customers.
Related Party Transactions - The Company leases a building from Bonnie Risk.
Ken Risk was the Chairman of the Board and President and CEO of the
company until his death in February 2013. Bonnie Risk is Ken's wife, who is a
director and an employee of the company. This building contains the Company's
sales and accounting departments, maintenance department, engineering department
and some production facilities. This lease requires a minimum payment of $1,535
on a month-to-month basis. The total lease expense for this arrangement was
$18,420 for the fiscal years ended April 30, 2014 and 2013.
The company also leased its airplane from former President and CEO Ken Risk, who
was also a majority stockholder, on a month-to-month basis requiring payments of
$2,250. Airplane lease expenses charged to operations for the fiscal year ended
April 30, 2013 were $22,500. During the year ended April 30, 2000, the Company
paid $210,000 and the former President/CEO contributed the airplane in trade for
another airplane. The Company and this officer jointly owned the airplane. The
airplane was sold during the year ended April 30, 2014.
One of the directors of the board, Joel Wiens, is the principal shareholder of
FirsTier Bank. FirsTier Bank is the financial institution the company uses for
its day to day banking operations. Year end balances of accounts held at this
bank are $3,879,000 for the year ended April 30, 2014 and $3,350,000 for the
year ended April 30, 2013. The Company also received interest income from
FirsTier Bank in the amount of $1,500 for the year ended April 30, 2014 and
$2,000 for the year ended April 30, 2013.
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Item 8 Financial Statements
Index to Financial Statements
George Risk Industries, Inc.
Page
Independent Auditor's Report 13
Balance Sheets April 30, 2014 and 2013 14
Statements of Income
For the Years Ended April 30, 2014 and 2013 16
Statements of Comprehensive Income
For the Years Ended April 30, 2014 and 2013 17
Statement of Changes in Stockholders' Equity
For the Years Ended April 30, 2014 and 2013 18
Statements of Cash Flows
For the Years Ended April 30, 2014 and 2013 19
Notes to Financial Statements 21
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Report of Independent Registered Public Accounting Firm
Board of Directors
George Risk Industries, Inc.
Kimball, Nebraska
We have audited the accompanying balance sheets of George Risk Industries,
Inc. as of April 30, 2014 and 2013, and the related statements of income,
comprehensive income, stockholders' equity, and cash flows for each of the
years in the two-year period ended April 30, 2014. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.The company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of George Risk
Industries, Inc. as of April 30, 2014 and 2013, and the results of their
operations and their cash flows for each of the years in the two year period
ended April 30, 2014, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Haynie & Company
Littleton, Colorado
August 13, 2014
<page>
George Risk Industries, Inc.
Balance Sheets
April 30, 2014 and 2013
2014 2013
____ ____
As Amended
__________
<c>
ASSETS
Current Assets
Cash and cash equivalents $ 5,872,000 $ 4,859,000
Investments and securities 23,904,000 22,208,000
Accounts receivable:
Trade, net of $4,500 and $4,000 doubtful
account allowance for 2014 and 2013,
respectively 2,034,000 1,915,000
Other 3,000 1,000
Note receivable, current - 5,000
Income tax overpayment - 347,000
Inventories 2,233,000 2,074,000
Prepaid expenses 132,000 60,000
____________ ____________
Total Current Assets $ 34,178,000 $ 31,469,000
Property and Equipment, net, at cost 625,000 701,000
Other Assets
Investment in Limited Land Partnership,
at cost 238,000 238,000
Projects in process 41,000 45,000
Note receivable - 2,000
Other 1,000 1,000
____________ ____________
Total Other Assets $ 280,000 $ 286,000
TOTAL ASSETS $ 35,083,000 $ 32,456,000
____________ ___________
____________ ___________
<FN>
See accompanying notes to financial statements.
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George Risk Industries, Inc.
Balance Sheets
As of April 30, 2014 and 2013
Liabilities and Stockholders' Equity
2014 2013
____ ____
As Amended
__________
Current Liabilities
Accounts payable, trade $ 109,000 $ 68,000
Dividends payable 953,000 817,000
Accrued expenses:
Payroll and related expenses 278,000 259,000
Income tax payable 75,000 -
Deferred income taxes 769,000 432,000
__________ ___________
Total Current Liabilities $2,184,000 $ 1,576,000
Long-Term Liabilities
Deferred income taxes 100,000 133,000
___________ ___________
Total Long-Term Liabilities $ 100,000 $ 133,000
Stockholders' Equity
Convertible preferred stock, 1,000,000 shares
authorized, Series 1--noncumulative, $20
stated value, 25,000 shares authorized, 4,100
issued and outstanding 99,000 99,000
Common stock, Class A, $.10 par value, 10,000,000
shares authorized, 8,502,881 shares issued 850,000 850,000
Additional paid-in capital 1,736,000 1,736,000
Accumulated other comprehensive income 1,222,000 743,000
Retained earnings 32,417,000 30,806,000
Less: treasury stock,3,472,706 and
3,467,356 shares, at cost (3,525,000) (3,487,000)
___________ ___________
Total Stockholders' Equity $32,799,000 $30,747,000
___________ ___________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,083,000 $32,456,000
___________ ___________
___________ ___________
<FN>
See accompanying notes to financial statements.
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George Risk Industries, Inc.
Income Statements
For the Years Ended April 30, 2014 and 2013
Year Year
Ended Ended
Apr 30,2014 Apr 30, 2013
___________ As Amended
____________
Net Sales $11,025,000 $10,510,000
Less: Cost of Goods Sold (4,902,000) (5,089,000)
___________ ___________
Gross Profit $ 6,123,000 $ 5,421,000
Operating Expenses:
General and Administrative 728,000 790,000
Sales 1,806,000 1,821,000
Engineering 56,000 71,000
Rent Paid to Related Parties 19,000 41,000
___________ ___________
Total Operating Expenses $ 2,609,000 $ 2,723,000
Income From Operations 3,514,000 2,698,000
Other Income (Expense)
Other - 4,000
Interest Expense (8,000) (3,000)
Dividend and Interest Income 668,000 789,000
Gain on Investments 384,000 460,000
Gain on Sale of Assets 11,000 -
___________ ___________
$ 1,055,000 $ 1,250,000
Income Before Provisions for
Income Taxes 4,569,000 3,948,000
Provision for Income Taxes
Current Expense 1,488,000 1,000,000
Deferred tax (benefit) expense (41,000) 227,000
___________ ___________
Total Income Tax Expense 1,447,000 1,227,000
Net Income $ 3,122,000 $ 2,721,000
Basic and Diluted Earnings Per Share
of Common Stock: $ 0.62 $ 0.54
Weighted Average Number of
Common Shares Outstanding 5,032,117 5,037,837
<FN>
See accompanying notes to financial statements.
Page 16
<page>
George Risk Industries, Inc.
Statements of Comprehensive Income
For the Years Ended April 30, 2014 and 2013
Year Year
Ended Ended
Apr 30,2014 Apr 30, 2013
___________ As Amended
____________
Net Income $ 3,122,000 $ 2,721,000
___________ ___________
Other Comprehensive Income, Net of Tax
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during period 1,047,000 736,000
Reclassification adjustment for
(gains) losses included in net income (224,000) 62,000
Income tax expense related to other
comprehensive income (344,000) (333,000)
___________ __________
Other Comprehensive Income 479,000 465,000
Comprehensive Income $3,601,000 $ 3,186,000
__________ ___________
__________ ___________
<FN>
See accompanying notes to financial statements.
Page 17
<page>
George Risk Industries, Inc.
Statements of Stockholders' Equity
For the Years Ended April 30, 2014 and 2013
Common Stock
Preferred Stock Class A
________________ ____________
Shares Amount Shares Amount
Balances, April 30,
2012 4,100 $ 99,000 8,502,881 $850,000
Purchases of common
stock - - - -
Dividend declared at
$0.50 per common
share outstanding - - - -
Unrealized gain (loss),
net of tax effect - - - -
Net Income - - - -
________ ________ _________ ________
Balances, April 30,
2013 4,100 99,000 8,502,881 850,000
________ ________ _________ ________
Purchases of common
stock - - - -
Dividend declared at
$0.50 per common
share outstanding - - - -
Unrealized gain (loss),
net of tax effect - - - -
Net Income - - - -
________ ________ _________ ________
Balances, April 30,
2014 4,100 $ 99,000 8,502,881 $850,000
________ ________ _________ ________
________ ________ _________ ________
<FN>
See accompanying notes to financial statements.
Page 18
<page>
George Risk Industries, Inc.
Statements of Changes in Stockholders' Equity
For the Years Ended April 30, 2014 and 2013
Accumulated
Treasury Stock Other
Paid-In (Common Class A) Comprehensive Retained
______________
Capital Shares Amount Income Earnings Total
$ 1,736,000 3,460,282 $ (3,451,000) $ 278,000 $30,603,000 $30,115,000
- 7,074 (36,000) - - (36,000)
- - - - (2,518,000) (2,518,000)
- - - 465,000 - 465,000
- - - - 2,721,000 2,721,000
__________ _________ ___________ ___________ ___________ ___________
1,736,000 3,467,356 (3,487,000) 743,000 30,806,000 30,747,000
__________ _________ ___________ ___________ ___________ ___________
- 5,350 (38,000) - - (38,000)
- - - - (1,511,000) (1,511,000)
- - - 479,000 - 479,000
- - - - 3,122,000 3,122,000
__________ _________ ___________ ___________ ___________ ___________
$1,736,000 3,472,706 $(3,525,000) $ 1,222,000 $32,417,000 $32,799,000
__________ _________ ___________ ___________ ___________ ___________
__________ _________ ___________ ___________ ___________ ___________
See accompanying notes to financial statements.
Page 18
<page>
George Risk Industries, Inc.
Statements of Cash Flows
Year Year
Ended Ended
Apr 30,2014 Apr 30, 2013
___________ As Amended
____________
Cash Flows from Operating Activities:
Net income $3,122,000 $2,721,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 156,000 174,000
(Gain) loss on sale of investments (257,000) (460,000)
(Gain) on sale of property and
equipment (127,000) -
Bad debt expense - (2,000)
Reserve for obsolete inventory 17,000 -
Deferred income taxes (40,000) 227,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (118,000) (244,000)
Inventories (177,000) 277,000
Prepaid expenses (65,000) 80,000
Employee receivables (2,000) (1,000)
Income tax overpayment - (593,000)
Increase (decrease) in:
Accounts payable 41,000 (28,000)
Accrued expense 19,000 47,000
Income tax payable 422,000 -
__________ __________
Net cash provided by (used in)
operating activities $2,991,000 $ 2,198,000
__________ __________
Cash Flows From Investing Activities:
Other assets manufactured and purchased (4,000) 1,000
Proceeds from sale of assets 127,000 -
(Purchase) of property and equipment (81,000) (104,000)
Proceeds from sale of marketable
securities 5,000 89,000
(Purchase) of marketable securities (620,000) (760,000)
(Purchase) of long-term investment - (10,000)
(Loans) made to employees - (3,000)
Collections of loans to employees 7,000 5,000
(Purchase) of treasury stock (38,000) (36,000)
__________ __________
Net cash provided by (used in)
investing activities $(604,000) $ (818,000)
__________ __________
Cash Flows From Financing Activities:
Principal payments on long-term debt - (4,000)
Dividends paid (1,374,000) (2,290,000)
__________ __________
Net cash provided by (used in)
financing activities $(1,374,000) $(2,294,000)
__________ __________
Net Increase (Decrease) in Cash and
Cash Equivalents $ 1,013,000 $ (914,000)
__________ __________
__________ __________
<FN>
See accompanying notes to financial statements
Page 19
<page>
Cash and Cash Equivalents, beginning
of period $ 4,859,000 $ 5,773,000
Cash and Cash Equivalents,
end of period $ 5,872,000 $ 4,859,000
__________ ___________
__________ ___________
Supplemental Disclosure for Cash
Flow Information:
Cash Payments for:
Income taxes paid $ 1,350,000 $ 1,607,000
Interest expense $ 8,000 $ 3,000
Cash receipts for:
Income taxes $ 223,000 $ 19,000
<FN>
See accompanying notes to financial statements
Page 20
<page>
George Risk Industries, Inc.
Notes to Financial Statements
April 30, 2014
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business-The company is engaged in the design, manufacture, and
marketing of computer keyboards, push-button switches, security alarm
components, pool alarms and hydro sensors.
Cash and Cash Equivalents-The company considers all investments purchased
with a maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts-Accounts receivable are customer
obligations due under normal trade terms. The company sells its products
to security alarm distributors, alarm installers, and original equipment
manufacturers. The company performs continuing credit evaluations of its
customers' financial condition and the company generally does not require
collateral.
The company records an allowance for doubtful accounts based on an analysis
of specifically identified customer balances. The company has a limited
number of customers with individually large amounts due at any given date.
Any unanticipated change in any one of these customers' credit worthiness
or other matters affecting the collectibility of amounts due from such
customers could have a material effect on the results of operations in the
period in which such changes or events occur. After all attempts to collect
a receivable have failed, the receivable is written off. The company has
recorded an allowance for doubtful accounts of $4,500 for the year ended
April 30, 2014 and $4,000 for the year ended April 30, 2013. For the fiscal
year ended April 30, 2014 bad debt expense was a net credit of $321 due
to bad debt recoveries during the year. For the fiscal year ended April 30,
2013, bad debt expense was a net credit of $1,926.
Inventories-Inventories are stated at the lower of cost or market. Cost is
determined using the average cost-pricing method. The company uses standard
costs to price its manufactured inventories approximating average costs.
Page 21
<page>
Property and Equipment-Property and equipment are recorded at cost.
Depreciation is calculated based on the following estimated useful lives
using the straight-line method:
Classification Useful Life 2013 2012
in Years Cost Cost
<c>
Dies, jigs, and molds 3-7 $1,599,000 $1,570,000
Machinery and equipment 5-10 1,176,000 1,137,000
Furniture and fixtures 5-10 147,000 147,000
Leasehold improvements 5-32 189,000 178,000
Buildings 20 658,000 658,000
Automotive and aircraft 3-5 89,000 411,000
Software 2-5 140,000 139,000
Land N/A 13,000 13,000
__________ __________
Total 4,011,000 4,253,000
Accumulated depreciation (3,386,000) (3,552,000)
__________ __________
Net $ 625,000 $ 701,000
__________ __________
__________ __________
Depreciation expense of $156,000 and $174,000 were charged to operations
for the years ended April 30 2014 and 2013, respectively.
Maintenance and repairs are charged to expense as incurred, and
expenditures for major improvements are capitalized. When assets are
retired or otherwise disposed of, the property accounts are relieved of
costs and accumulated depreciation and any resulting gain or loss is
credited or charged to operations.
Advertising-Advertising costs are expensed as incurred and included in
selling expenses. Advertising expense amounted to $217,000 and $243,000
for the years ended April 30, 2014 and 2013, respectively.
Income Taxes-US GAAP requires use of the liability method, whereby current
and deferred tax assets and liabilities are determined based on tax rates
and laws enacted as of the balance sheet date. Deferred tax expense
represents the change in the deferred tax asset/liability balances.
Page 22
<page>
The flow-through method of accounting for tax credits has been adopted by
the company. Such credits are reflected as a reduction of the provision
for income taxes in the year in which they become available.
Net Income Per Common Share-Net income per common share is based on the
weighted average number of common shares outstanding during each fiscal year.
The dilutive effect of convertible preferred stock is reflected in diluted
earnings per share by application of the if-converted method. Under this
method, preferred dividends applicable to convertible preferred stock are
added to the numerator and convertible preferred stock is assumed to have
been converted at the beginning of the period.
Accounting Estimates-The preparation of these financial statements requires
the use of estimates and assumptions including the carrying value of assets.
The estimates and assumptions result in approximate rather than exact amounts.
Financial Instruments-Financial instruments consist of cash and cash
equivalents, marketable securities, accounts receivable and accounts payable.
The carrying values of these financial instruments approximate fair value due
to their short-term nature.
Revenue Recognition-Revenue is recognized when risks and benefits in ownership
are transferred, which normally occurs at the time of shipment of products.
Comprehensive Income-US GAAP requires disclosure of total non-stockholder
changes in equity in interim periods and additional disclosures of the
components of non-stockholder changes in equity on an annual basis. Total non-
stockholder changes in equity include all changes in equity during a period
except those resulting from fiscal investments by and distributions to
stockholders.
Segment Reporting and Related Information-The Company designates the internal
organization that is used by management for allocating resources and assessing
performance as the source of the Company's reportable segments. US GAAP also
requires disclosures about products and services, geographic area and major
customers. At April 30, 2014, the Company operated in two segments organized
by security line products and all other products. See Note 9 for further
segment information disclosures.
Page 23
<page>
Reclassifications-Certain reclassifications have been made to conform to the
current year presentation. The total net income and equity are unchanged due
to those reclassifications.
Recently Issued Accounting Pronouncements- In July 2013, the FASB issued
Accounting Standards Update No. 2013-11, Presentation of an Unreconized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax
Credit Carryforward Exists, ("ASU 2013-11"). The objective of this update is
to eliminate the diversity in practice in the presentation of an unrecognized
tax benefit when a net operating loss carryforward, a similar tax loss or a
tax credit carryforward exists. The amendments in this update require an
entity to present an unrecognized tax benefit in the financial statements as
a reduction to a deferred tax asset for those instances described above,
except in certain situations discussed in the update. ASU 2013-11 is
effective for fiscal years, and inerim periods within those years, beginning
after December 15, 2013. The adoption of this standard is not expected to have
a material impact on the Company's financial statements.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue
from Contracts with Customers. The objective of this update is to provide a
robust framework for addressing revenue recognition issues and, upon its
effective date, replaces almost all existing revenue recognition guidance.
This update is effective in annual reporting periods beginning after December
15, 2016 and the interim periods within theat year. The Company is evaluating
the impact of this update on the Company's financial statements.
2. INVENTORIES
Inventories at April 30, 2014 and 2013 consisted of the following:
<c>
2014 2013
__________ __________
Raw materials $1,575,000 $1,552,000
Work in process 509,000 412,000
Finished goods 331,000 275,000
__________ __________
2,415,000 2,239,000
__________
Less: allowance for obsolete inventory (182,000) (165,000)
__________ __________
Totals $2,233,000 $2,074,000
__________ __________
__________ __________
Page 24
<page>
3. INVESTMENTS
The Company has investments in publicly traded equity securities, corporate
bonds, state and municipal debt securities, real estate investment trusts,
money markets, certificates of deposits and hedge funds. The investment in
securities, which include all investments except for the hedge funds, are
classified as available-for-sale securities, and are reported at fair value.
Available-for-sale investments in debt securities mature between May 2014 and
November 2048. The Company uses the average cost method to determine the cost
of securities sold and the amount reclassified out of accumulated other
comprehensive income into earnings. Unrealized gains and losses are excluded
from earnings and reported separately as a component of stockholders' equity.
Dividend and interest income are reported as earned.
The Company has elected to record the investments in hedge funds at cost due to
the small ownership percentage. These investmens are reported at an aggregate
carrying amount of $727,000, as of April 30, 2014. Additionally, the
investments have been evaluated for impairment and have been determined to not
be impaired as of April 30, 2014.
As of April 30, 2014, investments consisted of the following:
Gross Gross
Cost Unrealized Unrealized Reported
Basis Gains Losses Value
Municipal bonds $ 6,771,000 $ 199,000 $ (60,000) $ 6,910,000
Corporate bonds $ 30,000 $ 1,000 $ - $ 31,000
REITs $ 56,000 $ 9,000 $ - $ 65,000
Hedge Funds $ 727,000 $ - $ - $ 727,000
Equity securities $12,103,000 $2,070,000 $ (120,000) $14,053,000
Money Markets and CDs $ 2,118,000 $ 0 $ 0 $ 2,118,000
Total $21,805,000 $2,279,000 $ (180,000) $23,904,000
The Company evaluates all investments for other-than temporary declines in
fair value, which are defined as when the cost basis exceeds the fair value for
approximately one year. The Company also evaluates the nature of the investment,
cause of impairment and number of investments that are in an unrealized
position. When an other-than-temporary decline is identified, the Company will
decrease the cost of the investment to the new fair value and recognize a loss.
The investments are periodically evaluated to determine if impairment changes
are required. As a result of this standard, management recorded impairment
losses of $18,000 for the year ended April 30, 2014 and $20,000 for the year
ended April 30, 2013.
The following table shows the investments with unrealized losses that are not
deemed to be other-than-temporarily impaired, aggregated by investment category
and length of time that individual securities have been in a continuous
unrealized loss position, at April 30, 2014.
Page 25
<page>
Less than 12 months 12 months or greater Total
Description Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
Municipal bonds $1,219,000 $ (33,000) $ 519,000 $ (27,000) $1,738,000 $ (60,000)
Equity securities $1,682,000 $ (101,000) $ 118,000 $ (19,000) $1,800,000 $ (120,000)
Total $2,901,000 $ (134,000) $ 637,000 $ (46,000) $3,538,000 $ (180,000)
Municipal Bonds
The unrealized losses on the Company's investments in municipal bonds were
caused by interest rate increases. The contractual terms of these investments
do not permit the issuer to settle the securities at a price less than the
amortized cost of the investment. Because the Company has the ability to hold
these investments until a recovery of fair value occurs, which may be maturity,
the Company does not consider these investments to be other-than-temporarily
impaired at April 30, 2014.
Marketable Equity Securities
The Company's investments in marketable equity securities consist of a wide
variety of companies. Investments in these companies include growth, growth
income, and foreign investment objectives. Management has evaluated the
individual holdings, and does not consider these investments to be other-than
-temporarily impaired at April 30, 2014.
Page 26
<page>
4. RETIREMENT BENEFIT PLAN
On January 1, 1998, the company adopted the George Risk Industries, Inc.
Retirement Savings Plan (the "Plan"). The Plan is a defined contribution
savings plan designed to provide retirement income to eligible employees
of the company and its subsidiaries. The Plan is intended to be qualified
under Section 401(k) of the Internal Revenue Code of 1986, as amended.
It is funded by voluntary pre-tax contributions from eligible employees who
may contribute a percentage of their eligible compensation, limited and
subject to statutory limits. The Plan is also funded by discretionary
matching employer contributions from the company. Employees are eligible to
participate in the Plan when they have attained the age of 21 and completed
one thousand hours of service in any plan year with the company. Upon leaving
the company, each participant is 100% vested with respect to the participants'
contributions while the company's matching contributions are vested over a
six-year period in accordance with the Plan document. Contributions are
invested, as directed by the participant, in investment funds available under
the Plan. Matching contributions of approximately $10,000 was paid during
the fiscal year ending April 30, 2014 and $12,000 for the year ended
April 30, 2013.
5. STOCKHOLDERS' EQUITY
Preferred Stock-Each share of the Series #1 preferred stock is convertible at
the option of the holder into five shares of Class A common stock and is also
redeemable at the option of the board of directors at $20 per share. The
holders of the convertible preferred stock shall be entitled to a dividend at
a rate up to $1 per share annually, payable quarterly as declared by the board
of directors. No dividends were declared or paid during the two years ended
April 30, 2014.
Convertible preferred stock without par value may be issued from time to time
as determined by the board of directors. Shares of different series shall be
of equal rank but may vary as to terms and conditions.
Class A Common Stock-The holders of the Class A common stock are entitled to
receive dividends as declared by the board of directors. No dividends may be
paid on the Class A common stock until the holders of the Series #1 preferred
stock have been paid. A dividend for the four prior quarters and provision has
been made for the full dividend in the current fiscal year.
During the fiscal year ended April 30, 2014, the Company purchased 5,350
shares of Class A common stock. This was initiated by stockholders
contacting the company.
Stock Transfer Agent-The Company does not have an independent stock transfer
agent. The company maintains all stock records.
Page 27
<page>
6. EARNINGS PER SHARE
Basic and diluted earnings per share, assuming convertible preferred stock was
converted for each period presented are:
April 30, 2014
___________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
<s> <c> <c>
Net Income $3,122,000
__________
__________
Basic EPS $3,122,000 5,032,117 $.6204
Effect of dilutive
Convertible Preferred
Stock - 20,500 (.0030)
__________ _________ ______
Diluted EPS $3,122,000 5,052,617 $.6174
__________ _________ ______
__________ _________ ______
April 30, 2013
___________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
<s> <c> <c>
Net Income $2,721,000
__________
__________
Basic EPS $2,721,000 5,037,837 $.5401
Effect of dilutive
Convertible Preferred
Stock - 20,500 (.0030)
__________ _________ ______
Diluted EPS $2,721,000 5,058,337 $.5371
__________ _________ ______
__________ _________ ______
Page 28
<page>
7. COMMITMENTS, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS
The Company leases a building from Bonnie Risk. Bonnie Risk is a majority
stockholder, a director and employee of the company. This building contains the
Company's sales and accounting departments, maintenance department,engineering
department and some production facilities. This lease requires a minimum payment
of $1,535 on a month-to-month basis. The total lease expense for this
arrangement was $18,420 for the fiscal years ended April 30, 2014 and 2013.
One of the directors of the board, Joel Wiens, is the principal shareholder of
FirsTier Bank. FirsTier bank is the financial institution the company uses for
its day to day banking operations. Year end balances of accounts held at this
bank are $3,879,000 for the year ended April 30, 2014 and $3,350,000 for the
year ended April 30, 2013. The Company also received interest income from
FirstTier Bank in the amount of $1,500 for the year ended April 30, 2014 and
$2,000 for the year ended April 30,2013.
Page 29
<page>
8. INCOME TAXES
Reconciliation of income taxes with Federal and State taxable income:
2014 2013
____________ ____________
<c> <c>
Income before income taxes $4,569,000 $3,948,000
State income tax deduction (282,000) (196,000)
Capital loss carryforwards
(utilized) accumulated - (479,000)
Interest and dividend income (505,000) (601,000)
Domestic production activities
deduction (349,000) (284,000)
Nondeductible expenses
and timing differences 91,000 27,000
__________ __________
Taxable income $3,524,000 $2,415,000
__________ __________
__________ __________
The following schedule reconciles the provision for income taxes
to the amount computed by applying the statutory rate to income
before income taxes:
<c> <c>
Income before taxes at statutory
rate $1,910,000 $1,650,000
Increase (decrease)income
taxes resulting from:
State income taxes (118,000) (82,000)
Interest and dividend income (211,000) (251,000)
Domestic production activities (146,000) (119,000)
Deferred taxes (41,000) 227,000
Other temporary and
permanent differences 53,000 (198,000)
__________ __________
Income tax expense $1,447,000 $1,227,000
__________ __________
__________ __________
Federal Tax Rate 34.0% 34.0%
State Tax Rate 7.8% 7.8%
____ ____
Blended statutory rate 41.8% 41.8%
____ ____
____ ____
Page 30
<page>
Deferred tax asset (liabilities) consist of the following
components at April 30, 2014 and 2012:
<c> <c>
Deferred tax current assets:
Capital loss carryforward $ - $ -
Allowance for doubtful accounts 2,000 2,000
Inventory valuation 77,000 69,000
Accrued vacation 30,000 30,000
Accumulated unrealized (gain)/loss
on investments (878,000) (533,000)
__________ __________
Net deferred tax assets (liabilities) $ (769,000) $ (432,000)
__________ __________
__________ __________
Deferred long-term tax assets (liabilities):
Depreciation (100,000) (133,000)
__________ __________
Net deferred long-term tax assets (liabilities) $ (100,000) $ (133,000)
__________ __________
__________ __________
All capital loss carry forwards were used up in prior fiscal years.
Page 31
<page>
9. BUSINESS SEGMENTS
The following is financial information relating to industry segments:
April 30,
2014 2013
Net revenue:
Security alarm products $ 9,393,000 $ 9,200,000
Other products 1,632,000 1,310,000
___________ ___________
Total net revenue $11,025,000 $10,510,000
___________ ___________
___________ ___________
Income from operations:
Security alarm products $ 2,994,000 $ 2,362,000
Other products 520,000 336,000
___________ __________
Total income from operations $ 3,514,000 $ 2,698,000
___________ ___________
___________ ___________
Identifiable assets:
Security alarm products $ 3,494,000 $ 3,778,000
Other products 1,287,000 797,000
Corporate general 30,302,000 27,881,000
___________ ___________
Total assets $35,083,000 $32,456,000
___________ ___________
___________ ___________
Depreciation and amortization:
Security alarm products $ 20,000 $ 23,000
Other products 116,000 131,000
Corporate general 20,000 20,000
___________ ___________
Total depreciation and
amortization $ 156,000 $ 174,000
___________ ___________
___________ ___________
Capital expenditures:
Security alarm products $ 33,000 $ 12,000
Other products 33,000 71,000
Corporate general 15,000 21,000
____________ ___________
Total capital expenditures $ 81,000 $ 104,000
____________ ___________
____________ ___________
Page 32
<page>
10. CONCENTRATIONS
The company maintains its cash balance in a financial institution in Kimball,
Nebraska. Accounts at this institution are insured by the Federal Deposit
Insurance Corporation for up to $250,000. For the years ended April 30, 2014
and 2013, the Company had uninsured balances of $3,708,000 and $3,100,000,
respectively. Management believes that this financial institution is
financially sound and the risk of loss is minimal. The Company also maintains
cash balances in money market funds at the above-mentioned financial
institution. Such balances are not insured.
The Company also has cash funds with Wells Fargo with uninsured balances of
$1,743,000. Managemetn believes that this financial institution is
financially sound and the risk of loss is minimal.
The company has sales to a security alarm distributor representing 39%
of total sales for the year ended April 30, 2014 and 40% for the year ended
April 30, 2013. This distributor accounted for 52% and 55% of accounts
receivable at April 30, 2014 and 2013, respectively.
Security switch sales made up 85% of the total sales for the fiscal year
ended April 30, 2014 and and 84% of the total sales for the fiscal year ended
April 30, 2013.
11. Fair Value Measurements
The carrying value of our cash and cash equivalents, accounts receivable and
accounts payable approximate their fair value due to their short term nature.
The fair value of our investments is determined utilizing market based
information. Fair value is the price that would be received from selling an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value
measurements for assets and liabilities, which are required to be recorded at
fair value, we consider the principal or most advantageous market in which we
would transact and the market-based risk measurements or assumptions that
market participants would use in pricing the asset or liability, such as
inherent risk, transfer restrictions, and credit risk.
US GAAP establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The levels of the fair value
hierarchy under US GAAP are described below:
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Level 1 Valuation is based upon quoted prices for identical instruments traded
in active markets.
Level 2 Valuation is based upon quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets
that are not active, and model-based valuation techniques for which all
significant assumptions are observable in the market.
Level 3 Valuation is generated from model-based techniques that use significant
assumptions not observable in the market. These unobservable assumptions
reflect our own estimates of assumptions that market participants would
use in pricing the asset or liability. Valuation techniques include use
of option pricing models, discounted cash flow models and similar
techniques.
Marketable Securities
As of April 30, 2014, our investments consisted of money markets, publicly
traded equity securities as well as certain state and municipal debt securities.
Our marketable securities are valued using third-party broker statements. The
value of the majority of securities is derived from quoted market information.
The inputs to the valuation are classified as Level 1 given the active market
for these securities; however if an active market does not exist, which is the
case for municipal bonds, the inputs are recorded as Level 2.
Fair Value Hierarchy
The following tables set forth our assets and liabilities measured at fair value
on a recurring basis and a non-recurring basis by level within the fair value
hierarchy. As required by US GAAP, assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the
fair value measurement.
Assets Measured at Fair Value on a Recurring Basis
As of April 30, 2014
Level 1 Level 2 Level 3 Total
Assets:
Money Markets and CDs $ 2,117,000 _ _ $ 2,117,000
Equity Securities $14,053,000 - _ $14,053,000
Corporate Bonds $ 31,000 - - $ 31,000
Municipal Bonds and REITS - $6,975,000 _ $ 6,975,000
Total fair value of assets
measured on a recurring basis $16,201,000 $6,975,000 - $23,176,000
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Item 9 Disagreements on Accounting and Financial Disclosures
There were no disagreements with accountants on accounting and financial
disclosure.
Item 9A Controls and Procedures
Evaluation of disclosure controls and procedures:
________________________________________________
Based on their evaluation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 30, 2014,
our president and chief executive officer (also working as our chief financial
officer) has concluded that our disclosure controls and procedures are effective
such that information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is (i) recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and (ii) accumulated and communicated to our management,
including our chief executive officer (also working as our chief financial
officer), as appropriate to allow timely decisions regarding disclosure.
A control system cannot provide absolute assurance, however, that the objectives
of the control systems are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within a company have been detected.
Internal control over financial reporting:
__________________________________________
The Company's management is responsible for establishing and maintaining
adequate internal controls over financial reporting for the Company. Due to
limited resources, Management conducted an evaluation of internal controls based
on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The
results of this evaluation determined that our internal control over financial
reporting was ineffective for the years ended of April 30, 2014 and 2013, due to
a material weakness. A material weakness in internal control over financial
reporting is defined as a deficiency, or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in
internal control over financial reporting that is less severe than a material
weakness, yet important enough to merit attention by those responsible for
oversight of our financial reporting.
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Management's assessment identified the following material weakness in internal
control over financial reporting:
1. The small size of our Company limits our ability to achieve the desired
level of separation of internal controls and financial reporting, particularly
as it relates to financial reporting and deferred taxes. Due to the passing
of our CEO, the current CEO and CFO roles are being fulfilled by the same
individual. We do not have an audit committee. These weaknesses contributed
to an error in the deferred tax calculation for the year ended April 30, 2013.
The 2013 financial statements were amended for this error.
As a result of the material weakness in internal control over financial
reporting described above, the Company's management has concluded that, as of
April 30, 2014 and 2013, the Company's internal control over financial
reporting was not effective based on the criteria in Internal Control
- Integrated Framework issued by the COSO.
We will continue to follow the standards for the Public Company Accounting
Oversight Board (United States) for internal control over financial reporting
to include procedures that:
1) Pertain to the maintenance of records in reasonable detail that fairly
reflect the transactions and dispositions of the Company's assets;
2) Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of the financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are being
made only in accordance with authorizations of management and the Board of
Directors; and
3)Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company's assets that
could have a material effect on the financial statements.
The Company has hired a controller, effective May, 2014 and all amended
financial reports have been filed.
This annual report does not include an attestation report of the Corporation's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
Corporation's registered public accounting firm pursuant to Section 404(c) of
the Sarbanes-Oxley Act of 2002, as amended, that permit the Corporation to
provide only the management's report in this annual report.
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Item 9B Other Information
None.
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Part III
Item 10 Directors and Executive Officers of the Registrant
(a & b) Identification of Directors and Executive Officers
All of the executive officers of the corporation serve at the pleasure of the
board of directors and do not have fixed terms.
The following information as of April 30, 2014 is furnished with respect to
each director and executive officer:
Director or
Name Principal Occupation or Employment Age Officer Since
Stephanie M. Risk- Chairman of the Board, Chief Executive 42 August 8, 1999
McElroy Officer and Chief Financial Officer
Sharon Westby Secretary/Treasurer 62 June 16, 2006
Jerry Andersen Director, retired 83 August 28, 1978
Donna Debowey Director, retired GRI plant manager 76 July 12, 2005
Joel H. Wiens Director, FirsTier Banks 84 September 6, 2007
Bonnie P. Risk Director, Stock Transfer Agent at GRI 64 March 15, 2013
The following director compensation table is furnished with respect to each
director that served during the year ended April 30, 2014:
Name Director's Stock Option Non-equity Non-qualified
Fees Paid Awards Awards incentive deferred
plan compensation
compensation earnings Total
<c> <c>
Stephanie Risk (1) -- -- -- -- -- --
Sharon Westby (1) -- -- -- -- -- --
Jerry Andersen (2) $ 150.00 -- -- -- -- $ 150.00
Donna Debowey (2) $ 150.00 -- -- -- -- $ 150.00
Joel H. Wiens (2) $ 150.00 -- -- -- -- $ 150.00
Bonnie P. Risk (1) -- -- -- -- -- --
The inside directors (1), or employees of the company, do not receive additional
compensation for their services. Outside directors (2) are paid $150 per meeting
for their services.
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(c) Identification of Certain Significant Employees
None.
(d) Family Relationships
Stephanie Risk-McElroy and Bonnie P. Risk have a daughter-mother relationship.
(e) Business Experience of Directors and Executive Officers
Stephanie Risk-McElroy, Chairman of the Board, Chief Executive Officer and Chief
Financial Officer, has over twenty years of experience in the accounting
field. Mrs. Risk-McElroy graduated from Hastings College with a degree in
Accounting. Stephanie worked for Platte Valley Sales from May 1990 until January
1997 as a staff accountant. In 1997, she pursued her career with an accounting
manager position at Kershner's Auto Korner in Hastings, Nebraska. She joined the
accounting staff at GRI in 1999 and then was promoted to CFO upon retirement of
the prior CFO. Upon the death of her father, Ken R. Risk, in February, 2013, she
was appointed to the position of Chairman of the Board and Chief Executive
Officer.
Ms. Risk-McElroy serves on the Board of Directors of GRI, as a direct link to
the financial condition of the company. She and her staff oversee all the
accounting obligations of the Company. She has knowledge and experience in
business outside of the company that makes her an asset to the Board. And with
her new appointment as President, she oversees all the day to day operations as
well.
Sharon Westby, the corporate secretary, worked at GRI right after high school
for a couple of years as the personal secretary to the founder of the company,
George Risk, who was president and CEO. Before she returned to the company in
1982, Sharon was a Clerk Steno 1 at Jackson County Welfare in Kansas City, MO,
worked in medical records at the Kimball County Hospital in Kimball, NE, and
also managed motels in Texas and Nebraska. She is the Executive Assistant to
the President and CEO and Sales Administrator of the Keyboard and Switch
division of GRI.
Ms. Westby continues in her position on the Board of Directors at GRI with over
27 years of experience with the company. She has seen the company through many
years of ups and downs, has great knowledge of her product line and is very
customer oriented in trying to sell her products to the "non-security use"
industry.
Jerry Andersen, director, worked in the banking industry from 1967 until his
retirement in August 2000. He was the Senior Vice President at American National
Bank in Kimball, NE as well as serving several years in high positions at First
State Bank in Kimball. His position with the bank for many years was as loan
officer and for the last four years he held the position of Compliance Officer.
Mr. Andersen has served many years on the Board of Directors at GRI. He brings
knowledge in financial and business matters to the table and although retired,
he still has an active interest in the success of the company.
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Donna Debowey, director, worked in various retail stores and restaurants until
she started at GRI in 1968. She started on the production line, but quickly
worked her way up the ranks. She has been a Production Line Supervisor,
Director of Quality Control and was named Plant Manager and Senior Vice
President in 1998. She held that position until her retirement in 2003.
Ms. Debowey made the transition from employee of GRI to a member of the Board of
Directors with no hesitation after her retirement. She brings her 40+ years of
experience in the industry to the table and has a vested interest in seeing the
continued success of the company that she helped to build.
Joel H. Wiens, Director, is an entrepreneur with many business interests. He is
a director and principal shareholder of FirsTier Banks Nebraska/Wyoming,
director of FirsTier II BanCorporation (which owns FirsTier Bank Nebraska/
Wyoming), Chairman of Rite-A-Way Industries (lodging and hospitality
industries), real estate investments, and ranching and livestock.
Mr. Wiens took his place on the Board of Directors when his predecessor Mike
Nelson, (who is affiliated with Mr. Wiens' financial institutions) retired from
the Board to take another position within the banks and moved away. Joel's
knowledge and experience in business and industry span 50+ years and serves as a
valuable asset to GRI.
Bonnie P. Risk, Director, attended Wayne State College in Wayne, Nebraska. Upon
returning back home to Columbus, NE, she worked in factory positions. Upon her
marriage to Ken Risk, she became a homemaker, raising 3 children and working at
several sales positions. In 1981, she and Ken started Platte Valley Sales in
Hastings, Nebraska, and her expertise was in accounting and sales. For 8 years,
she ran the Hastings business while Ken devoted his time to both GRI in Kimball
and Platte Valley Sales in Hastings. Ken and Bonnie moved to Kimball in 1997. In
1998, she began at GRI in sales support. She continues in sales support, and
became the company stock transfer agent in 2004 upon retirement of Eileen Risk
and is an assistant to the chief financial officer.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
None.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our executive officers and directors
and persons who own more than 10% of a registered class of our equity securities
to file with the SEC initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of our common
stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required by the SEC
regulations to furnish us with copies of all Section 16(a) reports that they
file.
Based solely on our review of copies of the Section 16(a) reports filed for the
fiscal year ended April 30, 2014, we believe that all filing requirements
applicable to our officers, directors, and greater than 10% beneficial owners
were complied with.
Code of Ethics and Code of Business Conduct
The company does not have a written code of ethics at this time. The company is
a small business and employees know that the President of the company must
approve all material business. The company also has checks and balances to make
sure that there is not any fraud or illegal activities taking place.
Corporate Governance
Nominating and Compensation Committees
We do not have standing nominating or compensation committees, or committees
performing similar functions. Our Board of Directors believes that it is not
necessary to have a standing compensation committee at this time because our
Board of Directors adequately performs the functions of such committee.
Our Board of Directors also is of the view that it is appropriate for us not to
have a standing nominating committee because our Board of Directors has
performed and will perform adequately the functions of a nominating committee.
Our Board of Directors has not adopted a charter for the nomination committee.
There have not been any defined policy or procedure requirements for
stock-holders to submit recommendations or nomination for directors. Our Board
of Directors does not believe that a defined policy with regard to the
consideration of candidates recommended by stockholders is necessary at this
time because we believe that, given the early stages of our development, a
specific nominating policy would be premature and of little assistance until our
business operations are at a more advanced level.
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Audit Committee
We do not have a standing audit committee at the present time. Our Board of
Directors has determined that we do not have a board member that qualifies as an
"audit committee financial expert" as defined in Item 401(h) of Regulation S-K,
nor do we have a board member that qualifies as "independent" as the term is
used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of
1934, as amended.
Other Committees
All proceedings of our Board of Directors for the year ended April 30, 2014 were
conducted by resolutions consented to in writing by our directors and filed with
the minutes of the proceedings of the Board of Directors. Our Company currently
does not have any committees.
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Item 11 Executive Compensation
The following table sets forth certain information regarding the compensation
paid to or accrued by the company for the chief executive officer for services
rendered in all capacities during each of the company's fiscal years ended
April 30, 2014 and 2013 (no other officer had compensation over $100,000):
Change
in Pension
Value and
Non-qualified
Name and Non-Equity Deferred All Other
principal Stock Option Incentive Plan Compensation Compen-
position Year Salary Bonus Awards Awards Compensation Earnings sation Total
______ ____ ______ _____ _____ ____ ________ ________ ________ ________
<c> <c> <c> <c> <c> <c>
Bonita Risk, 2014 $36,000 $ -- -- -- -- -- $106,000 $142,000
Director
Shareholder
Employee
Bonnie Risk received a base salary and bonus/commission based on a percentage
of sales for the year.
There were no other officers compensated in excess of $100,000 for the fiscal
year ended April 30, 2014.
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Item 12 Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding our Common Stock
beneficially owned as of April 30, 2014, for (i) each stockholder known to be
the beneficial owner of 5% or more of our outstanding Common Stock, (ii) each
executive officer and director, and (iii) all executive officers and directors
as a group. In general, a person is deemed to be a beneficial owner of a
security if that person has or shares the power to vote or direct the voting
of such security, or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities
of which the person has the right to acquire beneficial ownership within 60
days. Share of Common Stock subject to options, warrants or convertible
securities exercisable or convertible within 60 days are deemed outstanding for
computing the percentage of the person or entity holding such options, warrants
or convertible securities but are not deemed outstanding for computing the
percentage of any other person. Percentages are determined based on 5,030,175
shares of Common Stock of the Company issued and outstanding and less treasury
shares as of April 30, 2014. To the best of our knowledge, subject to community
and marital property laws, all persons named have sole voting and investment
power with respect to such shares, except as otherwise noted.
Name and Address Number of Shares % of Class
of Beneficial Owner (1) of Common Stock (2) of Stock
Outstanding (3)
<c>
Ken R. Risk Irrevocable Trust, Bonita Risk, Trustee 2,187,056 43.4%
Stephanie M. Risk-McElroy - Chairman, CEO & CFO 1,775 Less than 1%
Donna Debowey - Director 500 Less than 1%
Bonnie Risk - Director 28,685 Less than 1%
Bonita Risk Family Irrevocable Trust 732,470 14.5%
Sharon Westby - Secretary 250 Less than 1%
Daniel Douglas - Vice President, Materials 250 Less than 1%
All Officers and Directors as a group
(5 persons and 2 trust) 2,950,986 58.6%
RWWM, Inc.
3260 Penryn Road
Suite 100
Loomis, CA 95650 291,743 5.79%
(1) unless otherwise indicated, the address of the named beneficial owner is
George Risk Industries, Inc., 802 S. Elm Street, Kimball, NE 69145
(2) Security ownership information for named beneficial owners (other than
executive officers and directors of the Company) is taken from statements
filed with the Securities and Exchange Commission pursuant to information
made known by the Company and from the Company's transfer agent.
(3) Based on the net shares outstanding as of April 30, 2014. This consists
of Common Shares issued and outstanding (8,502,881) less treasury shares
(3,472,706).
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Changes in Control
We are not aware of any arrangements, including any pledge by any person of
our securities, the operation of which may result in a change in control of
the Company.
Item 13 Certain Relationships and Related Party Transactions
During each of three years ended April 30, 2014, 2013, and 2012, the company
executed transactions with related entities and individuals. Each of the
transactions was in terms at least as favorable as could be obtained from
unrelated third parties.
<s> <c> <c> <c>
Related Party 2014 2013 2012
Airplane Lease
Ken R. Risk,
Former President and CEO $ - $ 22,500 $ 27,000
Building and Warehouse
Leases/Rentals
Ken R. Risk,
Former President and CEO $ - $ 15,350 $ 18,420
Bonnie Risk, Director $ 18,420 $ 3,070 -
Bank Balances
Joel Wiens, Director $3,878,793 $3,349,596 $4,818,466
Interest Income
Joel Wiens, Director $ 1,543 $ 2,211 $ 3,150
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Item 14 Principal Accountant Fees and Services
1)Audit Fees
For each of the last two fiscal years the company incurred aggregate fees and
expenses for professional services rendered by our principal accountants for the
audit of our annual financial statements and review of our financial statements
for Form 10-Q. The amounts are listed below:
FYE 2014 $39,000 Haynie & Company
FYE 2013 $38,000 Haynie & Company
2) Audit-Related Fees
The company incurred aggregate fees and expenses for professional services
rendered by our principal accountants for the audit of the company's employee
benefit plan. The amounts are listed below:
FYE 2014 $ 6,000 Haynie & Company
FYE 2013 $ 6,000 Haynie & Company
3) Tax Fees
The company incurred aggregate fees or expenses for professional services
rendered by our principal accountants for tax compliance, tax advice, and
tax planning for the last two fiscal years. The amounts are listed below:
FYE 2014 $ 5,070 Haynie & Company
FYE 2013 $ 3,945 Haynie & Company
4)All Other Fees
There were no other fees incurred during each of the last two fiscal years.
5) The Board of Directors, considered whether, and determined that,
the auditor's provisions of non-audit services were compatible with
maintaining the auditor's independence. All the services described above
were approved by the Board of Directors pursuant to its policies and
procedures.
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Part IV
Item 15 Exhibits and Reports on Form 8-K
3.(1).a Articles of Incorporation - Filed as Exhibit 5 to the
Registrant's Form 10-K for the fiscal year ended
April 10, 1970, and incorporated by reference herein
3.(i).b Certificate of Amendment to the Articles of
Incorporation of the Registrant - Filed as Exhibit 1.2
to the Registrant's Form 10-K for the fiscal year
ended April 30, 1971, and incorporated by reference
herein
3.(ii).c By-laws - Filed as Exhibit 1.3 to the Registrant's Form
10-K for the fiscal year ended April 10, 1971, and
incorporated by reference herein
10.1 Vendor agreement dated as of February 16, 2011 between Honeywell
International, Inc., acting through the ADI business of its Security
Group ("ADI") and George Risk Industries, Inc. - filed herewith (see
footnote below)
10.2 8-k for special dividend
10.3 8-K Ken Risk death
31.1 Certification pursuant to Rule 13a-14(a) of the Chief Executive Officer
(Principal Financial and Accounting Officer)
32.1 Certification pursuant to 18 U.S.C. 1350 of the Chief Executive Officer
(Principal Financial and Accounting Officer)
<FN>
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 under the Securities Exchange Act of
1934. The request is currently under review.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
/s/ Stephanie Risk-McElroy Date
Stephanie Risk-McElroy, President and Chairman of the Board August 13, 2014
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated.
/s/ Stephanie M. Risk-McElroy President and Chairman Date
Stephanie Risk-McElroy of the Board August 13, 2014
/s/ Jerry Andersen Director Date
Jerry Andersen August 13, 2014
/s/ Joel H. Wiens Director Date
Joel H. Wiens August 13, 2014
/s/ Donna Debowey Director Date
Donna Debowey August 13, 2014
/s/ Bonnie P. Risk Director Date
Bonnie P. Risk August 13, 2014
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